Sun | Sep 15, 2019

Editorial | The politics of poverty

Published:Tuesday | August 20, 2019 | 12:19 AM

The recent publication of the 2017 Jamaica Survey of Living Conditions (JSLC) by the Planning Institute of Jamaica (PIOJ) and the Statistical Institute of Jamaica (STATIN), showing a 2.2 percentage point increase in the rate of poverty, has set off the usual national hand-wringing debate about who or what is responsible.

The opening salvo came with the opposition spokesman on finance, Mark Golding, blaming what he points out as the “regressive” measure to increase the income tax threshold to $1.5 million, implanted in 2016. This measure was paid for by a significant increase in consumption taxes, and which the Government advertised as part of its strategy to shift from direct to indirect taxes and to fulfil an election promise.

Minister of Finance Dr Nigel Clarke, in a rather ­curious response to the regressive impact of the new tax measure, dismissed the argument that “low-­income wage earners, unemployed, pensioners and micro business operators” were made to bear the impact of the additional taxes, since inflation in 2017 was the same as in 2016.” The fact is that the new tax measures, directly or indirectly, affected a broad cross section of taxpayers, including those who did not benefit from the income tax threshold increase.

The standard practice in debating the JSLC is for the Government of the day to be on the defensive once the poverty rate increases, while the Opposition goes on the offensive. If, on the other hand, the rate falls, the Government reports the numbers with glee and takes the credit. The Opposition then either remains silent or dismisses the numbers.

These political point-scoring debates usually miss the essence of the problem, i.e., the high levels of ­poverty in the country and the need for policy changes to build wealth and improve welfare.

JSLC AND SOCIAL POLICIES

The JSLC was started in 1988 to measure the impact of structural adjustment policies on the Jamaican ­population. Over the years, the survey has been broadened to cover a range of topics and to look deeper into the issue of poverty in all its ­manifestations. The almost-exclusive focus on the poverty rate is, therefore, short-sighted. It is important that there be deeper interrogation of the wide amount of data collected. Close attention needs to be paid to how government policies are impacting various marginalised groups of the population, and what is happening in different geographic areas.

The limitations of the JSLC as a poverty measure, with its emphasis on household consumption expenditure, are well known. The measure does not capture wealth or asset distribution, for example. After 30 years, it may be timely for STATIN/PIOJ to move to the next level and start measuring income and wealth distribution to better capture inequality in Jamaica – a huge problem deeply rooted in our colonial history.

There is a vast amount of research worldwide which demonstrates that widening inequality in a society weakens social capital and undermines social cohesion. Growing inequality tends to lower GDP growth over the medium term and feeds instability, crime and corruption. Given the nature of the Jamaican society, the Government should have every incentive to want to know the impact of its policies on income distribution. For example, are there clear links between the current tax structure, macroeconomic policies and growing inequality?

History will recall that during the period of very rapid economic growth during the 1950s and 1960s, inequality and social instability grew sharply in Jamaica. The attempt to correct some of the problems caused by the sharp rise in inequality, by a programme of redistribution, had a very negative impact on GDP growth. It is therefore very important that the issue of inequality and the link with social and economic policies be studied carefully.

Many of the existing social and poverty ­programmes, including PATH, the social safety net, the Jamaica Social Investment Fund, and the Jamaica Drugs for the Elderly Programme flowed from careful attention to the data flowing from the JSLC during the 1990s into the 2000s. A legitimate question to be posed is how effective these programmes have been, and whether they are still relevant in their current form. These are very deep, non-trivial questions that the JSLC can help us to answer.